The impact of the wallis inquiry on Australian banking efficiency performance

Abstract

Since the deregulation of the Australian financial system in early 1980s, the banking industry has undergone sweeping changes. As of December 2005, there were 53 authorised banks in Australia, including eleven foreign subsidiary banks and 29 branches of foreign banks (APRA 2005). With the entry of foreign banks and former domestic building societies into the market, domestic banks have reacted to the intensified competition by performing more efficiently and engaging more actively in mergers and acquisitions. However, the four major banks generally hold the view that the consolidation of the financial services industry and the competitiveness of the industry in the international market have been hindered by a restrictive political and regulatory environment, such as the four pillars policy prohibiting mergers among the four major banks (Guy and Whyte 2002). Therefore, it is important to analyse the performance of the Australian banking industry, with particular reference to the Wallis Inquiry into the Australian Financial System (hereafter the Inquiry) in 1996, to which the Australian Federal Government responded by adopting the four pillars policy. © 2009 Physica-Verlag Heidelberg.